Contractor Loans: Independent Self-Employed Gig Worker Loans

The term “contractor loans” includes:

  • Independent contractor loans
  • Self-employed loans
  • Gig worker loans

That is about 7% of all workers in the USA. That includes me!

Being a self-employed independent entrepreneur is challenging. Yet we do it because we love it and/or because we must. Either way, a time comes when we need extra money to pay the bills, keep operating, and to expand our business.

What Are General Contractor Loans?

Usually, general contractor loans are referring to a self-employed construction contractor or their construction company. A general contractor hires sub-contractors (concrete companies, carpenters, plumbers, electricians) to build a house.

Independent contractor building a new house. Contractor loans are commonly used to buy equipment.

However, in the side hustle gig economy, a general contractor could be any business that hires independent contractors to do work for them. The people hired are self-employed entrepreneurs. Yes, that includes gig workers and side hustlers.

For example: many local delivery companies are independent contractors that work for online retailers to deliver the products the retailer sold. One example of this are the Amazon Delivery Service Partners.

Many years ago, where I live, there was a marketing company that helped owner builders to build their own homes. Basically, they were selling custom house plans and mortgages. If need be, when the homeowner defaulted on the construction loan, the marketing company would hire an independent contractor to complete the house.

So, general contractor loans could go to many different kinds of businesses.

Self-Employed Gig Worker Loans for Independent Contractors

Uber sign on top of a white car.

Are you an Uber Driver or a Lyft Driver or a DoorDash driver? Or an Amazon Delivery Service Partners driver? You could qualify for independent contractor loans.

Want to start or expand your self-employed business?

Are your customers not paying on time?

Need money to buy or repair your vehicle? You need contractor loans.

Construction contractors always need new equipment or equipment repair loans.

More reasons to get contractor loans:

  • Provide cash to pay bills during the offseason
  • Generate new customers through additional marketing
  • Recover after unexpected disasters happen
  • Build a business office in the backyard

How To Get Contractor Loans for Your Business

There are many types of contractor loans that are available depending upon your personal and business circumstances. The best way to find out what you can get is to apply for contractor loans from multiple lenders at the same time. This is a prequalification application and it does not affect your credit scores. Once you apply you will receive offers from interested lenders. Simply compare the loan offers and accept the best one, which then begins a formal loan application.

Types of Independent Self-Employed Gig Worker Contractor Loans

Unsecured Business Loans

An unsecured business loan is like a personal signature loan. Where the borrower doesn’t need any collateral to get the loan. These contractor loans are based upon credit scores and available income to make the loan payments.

Unsecured business loans can be used for any business purpose. However, these loans come with higher interest rates than secured business loans.

The borrower’s FICO credit score or the business credit score must be at least 450 and the business needs to have monthly income. The required amount of business income and the time the business has been operating will vary from lender to lender.

If the business is a startup the business owner’s personal credit score and income will be used to determine the loan terms.

Business Line of Credit

This functions as a financial backup plan, and is essential for every business. A business line of credit functions just like a credit card. You only pay interest on the amount borrowed. Business lines of credit can be obtained with just three months of business history and $4,000 per month business income.

Business Credit Cards for The Self-Employed

This is typically the first type of self-employed loans obtained by most businesses. Such loans are based on the business owner’s credit score or upon the business’s credit score if one has been established.

Business credit cards must be used for business purposes only. Likewise, don’t use personal credit cards for business purposes unless you are a sole proprietor. In which case there is no legal separation between the business owner and the business entity.

Equipment Financing

Every Uber, Lyft, DoorDash, and Amazon Delivery Service Partner drivers need vehicles to be self-employed contractors.

Every self-employed business owner needs some type of equipment to operate their business. Even me. My office is filled with specialized office furniture and multiple computers. Plus, specialized software and online services that cost thousands of dollars.

Equipment financing loans are needed to start many independent contractor gigs and side hustles. Of course, every construction contractor, product manufacturer, and installation or repair business needs contractor loans. Either as a startup business or to expand their business.

Two computers in a home office.

Every business needs office equipment.

Invoice Factoring

Do you bill your customers but have to wait 30-60 days to get paid? Do you need that money now? Well, invoice factoring can save your business.

With invoice factoring loans the lender pays you immediately up to 80% of what you are owed from your customers. When the lender collects what is owed from your customers, they keep between 1% and 4% and you get the remainder. So, you get from 96% to 99% of the original amount owed by your customers.

Small Business Administration (SBA) Loans

SBA loans for the independent contractors and self-employed offer the best interest rates and loan terms. However, the application requirements are very difficult for gig workers and startup businesses to complete.

First, you must apply through a bank or other lender that will require numerous documents and information about your business. You will need an accountant and a business plan among other things.

The SBA requires that business owners have already used their personal assets to fund their business. Plus, they must have applied for and been denied loans from other lenders.

Banks offer SBA loans because the SBA will guarantee up to 85% of the loan. Which means that the bank has less risk when lending to independent contractors and the self-employed gig workers. However, banks are very cautious about lending to anyone, especially new businesses with bad credit.

So, expect the bank to want you to somehow guarantee that other 15% of the loan. Typically, that means making a down payment and providing collateral.

The alternative is to borrow from online lenders that don’t require all those documents and other requirements. Online lenders charge more, but you can get the money needed very quickly. You can have funds the next day (or a couple days) instead of waiting many months for an SBA loan.

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